What’s the link between finance and sustainability?

Michael Wilks, Financial Controller at Winnow explains how businesses can run efficiently whilst also doing the right thing for the environment.

The tension between profits and principles is a myth. When a business identifies a profitable model for solving one of the world’s major issues, people invest in it, scale it up, and solve the problem in a meaningful way. When you can make a profit from solving an issue like food waste, the solution to the problem will be applied on a global basis.

If Winnow were a charity, we would be helping a couple of ethical restaurants in London throw less quinoa away. Because we are a profit-making business, however, we are live in thirty countries and working with thousands of chefs to make a tangible difference on a global scale.

And the principles, they feed the profits. There is a reason why purpose-led businesses are all the rage at the moment – it makes it far easier to attract and retain the best talent. When the whole team buys into the company’s mission and works together to achieve it the productivity of the business goes through the roof.

“Study after study has shown that people are happier and more productive in ethical, purpose-led businesses. Staff retention is greatly improved, and recruitment is easier and therefore cheaper.”

It is my belief that the finance function sets the tone for the entire business – it’s the engine room, after all. It is very easy for sustainability and ethics to be trumpeted by a company’s marketing department in a shallow effort to build the brand, but this is seen for what it is by increasingly savvy employees and clients. If the finance function buys into sustainable and ethical values and lives by them, however, everyone feels that the values are for real. They start, perhaps even unconsciously, to follow suit.

This can be driven by honesty, transparency and helpfulness, but even on a mechanical level you can make a big difference. Paying suppliers on time is a straightforward example. Then there is how you select your suppliers and structure your agreements with them. The 120-day payment terms offered by Carillion to its suppliers were a good example of unethical practice and see where it got them.

The finance team can also be instrumental in shifting the focus from the next quarter’s results to a longer-term view that will automatically encourage a more sustainable and ethical approach across the business. The data you choose to present and how you choose to present it can raise everyone’s eyes from short-term profit, and in selecting what stories to tell with the data you can introduce ethics into the conversation.

“Our clients are throwing away a total of 5,000 tonnes less food per year than they were before they started working with us. This saves the equivalent of 20,000 tonnes of carbon dioxide from being emitted.”

There is a view that cutting corners and costs saves you money and doing things ethically is expensive. There a number of examples of how to cut costs ethically – just looking around me I can see that most of our furniture is second-hand and reconditioned. Energy efficiency is another example – our Plumen bulbs give the same effect as incandescent bulbs but with a fraction of the electricity usage – and we prefer public transport to Uber.

But ethics can have a more fundamental impact. Our people are our greatest asset, but they’re also our greatest expense. One of the most significant things we can do to improve our bottom line, therefore, is to get more out of our people and to attract the best without having to pay them bankers’ salaries. Study after study has shown that people are happier and more productive in ethical, purpose-led businesses. Staff retention is greatly improved, and recruitment is easier and therefore cheaper. This gives your bottom line a tremendous boost, and more than makes up for any extra expenses you might pick up in driving ethical change within the business.

The financial incentive to sustainability is a strong principal that Winnow was founded on. We deal specifically with food waste in the hospitality industry – the UN estimates that this sector wastes $100bn of food each year – and we work with large global companies like Compass Group, IKEA and Accor Hotels. These are well-run, cost-conscious businesses that don’t want to be throwing food away. Their reasoning doesn’t need to have anything to do with sustainability at all, although it often does. They’ve paid good money for this food, and they want it to be earning revenue rather than going in the bin.

Companies are throwing food away because they don’t know how to stop doing it – they don’t know what they’re throwing away and why. They lack the information to be able to take the appropriate measures to reduce food waste, and Winnow provides them with this information through the waste monitoring devices we put in their kitchens.

Our clients are throwing away a total of 5,000 tonnes less food per year than they were before they started working with us. This saves the equivalent of 20,000 tonnes of carbon dioxide from being emitted.

This is an impressive environmental outcome, but it is a substantial boost to their bottom line as well. These 5,000 tonnes of food, after all, cost £12.5m. The catering industry in particular is well-known for its low margins, and by halving their food waste our clients can reduce their food costs by 2-8%. This can double their margins. I would call that a very strong financial incentive.